U.S. Department of Housing and Urban Development

What Now? Peer to Peer Discussion

April 17, 2012

HUD Community Planning and Development

Speakers • Speakers

– David Noguera, HUD – Hunter Kurtz, HUD – Marsha Tonkovich, ICF – Stu Hershey, Urban Ventures – David Boehlke, Urban Ventures – Surabhi Dabir, Enterprise – Matt Do, Enterprise – Michael Freeman, Center for Community Progress – Patrick Kenney, Cleveland Housing Network – Stevens Brown, Montgomery County MD – Cardigan Shipman, Gaskin Realtors (in partnership with City of

Chicago and Mercy Portfolio Services)

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Q and A Format • How to ask questions

– Change status in Live Meeting from green to purple

– Press *1 to ask a question through Premiere Conference

Provide Name and Organization

If question already answered, press *2 to remove from queue

– Change status back to green after question answered

– Can also use Live Meeting written question function

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Webinar Series • Webinar #1 – March 29: Marketing & Disposition

• Webinar #2 – April 5: Scattered Site Rental

• Webinar #3 – April 10: NSP and Land Banking

• Webinar #4 – April 17: Best Practices Peer to Peer and Experts Roundtable

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Agenda • Presentation on key topics:

– Brief recap of past presentations in series – Presentations by grantees

• Panel discussion • Questions throughout

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What is Disposition? • Process of selling or renting homes and land

acquired/rehabilitated/constructed with NSP

• Disposition or holding costs are carried out by grantee or subrecipient directly (not by developers under this category – can be rehab) – On-going site security – Maintenance costs – Insurance – Taxes – Marketing

• Develop a disposition strategy 6

Continuum of Disposition Strategy Options in Slow Selling Markets

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Change Marketing Approach

Alter Financial Structure

Lease Purchase

Scattered Site

Rental

Land Banking

Demolish Blighted Units & Re-Use

Land

Feedback: Which of the following is your primary disposition activity?

• Marketing for sale properties

• Lease purchase

• Landbanking

• Scattered site rental

• Demolition

• None of the above/other

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Disposition Techniques • Marketing: Focus on targeted marketing of unit and

neighborhood -- Good marketing requires: – Knowing the product you are selling – Growing the pool of potential buyers – Making the deals work – Making neighborhoods attractive

• Financing: Sell at below market value and widen range of potential buyers with deeper subsidies – Offer mortgage financing, soft seconds, interest subsidies

& other low cost financing

• Lease Purchase: Home is rented for defined period of time until occupant can buy

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Feedback: Which of the following have you found to be most helpful in getting units sold?

• Developing a pool of potential homebuyers

• Working with realtors

• Marketing the neighborhood

• Reducing the sales price

• Offering homebuyer financial assistance (downpayment, closing costs)

• Offering mortgage assistance (first or second mortgages)

• None of the above/other

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Disposition Techniques (cont) • Scattered Site Rental - Key decisions:

– Rental management: Private v. grantee management If Grantee does not have capacity,

recommend using developer or third-party – Development decisions: Place homes, if

possible, in clustered areas – Appliances/Rehab: Reduce maintenance

costs by standardizing appliances, using energy efficient fixtures Use data system to track property systems

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Disposition Techniques (cont)

• On the NSP Resource Exchange – NSP Single-Family Rental Toolkit (Tools from

Beyond Housing): http://hudnsphelp.info/index.cfm?do=viewToolkitsHome&programtypeid=4

– NSP Scattered Site Rental Training Video: http://hudnsphelp.info/index.cfm?do=viewResource&ResourceID=1157

– NeighborWorks Scattered Site Toolkit: http://www.stablecommunities.org/ssr/0/SSR_Index.htm

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Disposition Techniques (cont) • Landbanks – Life cycle:

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Disposition Techniques (cont) • Implications of long term land banking:

– Tracking properties - Organizations must maintain all files and records on each property that benefits from NSP funding.

– What is your ‘Plan B’? Until the eligible end use requirement is met, the grant cannot be closed out. While there are ten years for the eligible end use to be met, conditions can and will change.

– Strategic thinking on acquisitions – questions to consider:

Does the property have strategic importance? Who is making the determination? Part of a planned development? Is the property being strategically banked, or just parked? What is the best and highest future use of the property?

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Disposition Techniques (cont) • Demolition: Could demolish blighted units and

use, sell or donate land – Not appropriate for units already rehabbed – HUD will be releasing additional guidance

about disposing of demolished and land banked property Policy will likely focus on end use of

property

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Feedback: What has been your greatest disposition challenge?

• Finding buyers who are interested in our target neighborhoods

• Finding buyers who qualify for a mortgage

• Lack of demand for homeownership in our community

• Community is overbuilt – lack of demand for any housing

• Cost of maintaining units pending sale

• Lack of partners with property management skills

• Security/vandalism pending sale

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Chicago NSP • Speaker: Cardigan Shipman

• A partnership of City of Chicago and Mercy Portfolio Service (MPS)

• MPS Acquires, evaluates and transfers properties to approved NSP developers

• MPS Monitors the construction of all NSP properties

• MPS/City of Chicago sets list price of NSP properties

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Chicago NSP

Chicago NSP • MPS has contracted with Gaskin Realtors Inc. to provide

consulting brokerage services on all NSP properties for sale • Consultant is a non interested party to all NSP transactions

• Insures properties are properly marketed to meet the AFMP outlined in the sub grant agreement

• Insures properties are indeed marketable in the communities chosen but the City

• Insures that properties are sold for the highest possible market price within NSP Guidelines

• To be a non interested mediator/ negotiator assisting in setting up and closing NSP deals

• To conduct Peer to peer training and outreach at local Realtors boards

• To find partnering lenders for NSP financing

• To find and assess housing counseling agencies for NSP homebuyer counseling and partnerships

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Chicago NSP • NSP Listing Brokers Gaskin, along with MPS sorted through RFQ,s to

determine which firms /agents would best suited to handle listing NSP properties:

Experience

Capacity

Community Development

Scope of work

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Chicago NSP • NSP Listing Brokers/NSP Developers

• NSP Developers must use one of 10 NSP approved listing brokers (exceptions made for developers with brokerage partners)

• All NSP approved Realtors go through annual training covering: • NSP developers • Listing agent requirements

• CMA’s • Compensation • Disclosures • PSA’s and forms • Marketing participation outreach

• Events • Speaking engagements

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Chicago NSP Property Spotlight

South Shore $175,000 “sold”

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Chicago NSP Property Spotlight -- Chicago Lawn

$124,000 “sold”

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Chicago NSP NSP Outreach and Marketing – Open House/Tour

Chicago NSP What happens when a home does not sell? Hot Properties list • A review of the of the property's exterior

factors are consider for: – Price reduction – Additional subsidy – Additional upgrade options – More Input and outreach (To Come)

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Chicago NSP NSP Disposition Status (as of 4/17/12) • Total properties closed- 28 • Total properties under contract – 6 • Total properties active on market-12 • Total Hot properties 8

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Cleveland Housing Network Opportunity Homes

• Speaker: Patrick J. Kenney

• Opportunity Homes was launched in 2009 to address Cleveland’s growing foreclosure crisis through immediate recovery strategies.

• The goal is to: – Rehabilitate 150 vacant homes for immediate sale; – Rehabilitate 150 vacant homes for lease purchase; – Demolish 300 unsalvageable homes;

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Cleveland Housing Network Opportunity

Homes Opportunity Homes:

CHN’s Targeted Neighborhood Stabilization Efforts

Partners: Cleveland Housing Network, Inc.

Neighborhood Progress, Inc. 6 Community Development Corps.

Target Areas: 6 Cleveland neighborhoods

Aligns with a city-wide market recovery plan

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Cleveland Housing Network, Inc. http://opphomes.com 28

Cleveland Housing Network Opportunity Homes

Key Factors to Success

MARKETING EXPOSURE

• For sale signs

• Quality websites

• MLS listing

• Customer Referrals

• Sales Call Center before

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Cleveland Housing Network Opportunity Homes

Key Factors to Success

SALES & LENDING MODEL

• Affordable Sales Prices

• Affordable Monthly Payments

• Quality Lending Team

before

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Cleveland Housing Network Opportunity Homes

EXIT STRATEGY: Short Term Lease Purchase

• Never to be used as the Primary Sales Strategy

• This must be your “Last Resort”

• Discipline yourself with a “Mandatory Days on Market Timetable” 120 to 180 days

• Limit your Lease Period to 3 to 6 months. If the property can’t close during that period, don’t put the family in

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Cleveland Housing Network Opportunity Homes

EXIT STRATEGY: Short Term Lease Purchase

• Enter into a “Month to Month Lease” and a “Purchase Agreement” prior to the family taking possession

• Escrow Deposit refundable only upon closing the transaction

• Limit your exposure ….you must be realistic with closing conditions

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Cleveland Housing Network Opportunity Homes

623 Homes Impacted in 3 Years

• 249 rehabs complete or in process (built to Green Communities© standards)

• 92% of for-sale homes sold • 100% occupancy in LIHTC homes • 36 homes under construction • 288 blighted homes demolished • 86 foreclosures averted

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Cleveland Housing Network Opportunity Homes

• Lessons Learned – Target the right markets

– Beat your competition

– Focus & attention to detail

– Cast a WIDE net in marketing efforts

– Buyers rule!

– Create an exit strategy (short-term lease purchase)

– Create reserves

– Remember: things ALWAYS take longer than you think!

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Montgomery County MD • Speaker: Stevens Brown • For its NSP1 award, County entered into

subrecipient agreements with county housing authority (Housing Opportunities Commission)

• Completed: 23 unit scattered site acquisition-rehab project for RENT to low income families

• Average per unit costs: Acquisition $239K, Rehab $45K, Total $284K

• Acquired only properties foreclosed or vacant over 90 days 35

Montgomery County MD • Rehab: Extensive, including Energy Star,

durable finishes, landscaping, anticipatory maintenance (replacing roof coming to end of its useful life)

• What made project work – Deep subsidy: All $284,000 in TDC was NSP

(including some provided by state) and CDBG – HOC extensive experience developing and

managing rental housing, including units OTHER than public housing

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Montgomery County – Before & After Photos

before

before

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Montgomery County – Before & After Photos

before

before

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Montgomery County – Before & After Photos

before

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Please Give Us Your Feedback

• Answer a few short questions • Link:

• http://www.surveymonkey.com/s/Roundtable_41712

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